GM-Toyota on the road to true world car

Fremont, Calif.
— The unprecedented pact between two giants of automaking - Toyota and General Motors - has worldwide significance for the industry, according to leading analysts.

Many details of the ''memorandum of understanding'' signed here Feb. 17 - including hiring, work rules, and union representation - remain to be worked out. The agreement apparently means that up to 3,000 of the area's more than 5, 000 laid-off auto workers will have an opportunity to go back to work in their old plant.

But unless stopped by either the US Federal Trade Commission (FTC) or the Japanese government, Toyota in late 1984 will begin turning out a front-wheel-drive car for General Motors in GM's now-quiet Fremont assembly plant.

Arvid Jouppi, an auto industry analyst in Detroit who has represented the industry in talks with Japan's automakers, sees a tremendous advance resulting from the GM-Toyota pact. The problems involved, he argues, ''will be minor compared with the benefits. This agreement presents for the first time a real opportunity for homoligation (conformity) of the standards between Japan and the United States on clean air, safety, paint, and a lot of other things.

''Federalizing (making a product conform to a nation's product regulations) of a car for sale in Japan raises its cost about 80 percent. We've never been able to break that bottleneck with Japan - that invisible tariff barrier.''

Mr. Jouppi says the US government isn't likely to spurn the job-creating opportunity offered by the GM-Toyota partnership.

Competitors of GM and Toyota also will face changed conditions. Chrysler Corporation chief executive Lee Iacocca has charged that the pact is ''fundamentally bad'' for the industry and would result in a net loss of jobs because at least half the components for the new car will be made in Japan. However, a Chrysler spokesman says that the man whose rescue of Chrysler was aided by a tie-in with Japanese industrial giant Mitsubishi has no plans at present to challenge it before the FTC.

Eiji Toyoda, chairman of Toyota Motor Corporation, has indicated that former GM workers wouldn't be guaranteed first chance at the new jobs. The response by officials of United Auto Workers (UAW) Local 1364 and rank-and-file members was immediate and angry; they've been anticipating the reopening of the Fremont plant since word of the GM-Toyota negotiations began to leak out weeks ago. One shop committee member said that if the company hired people who had never worked at the plant before, the newcomers would be met with ''a lot of hostility.''

At a press conference Feb. 17, in Fremont, Mr. Toyoda and GM chairman Roger B. Smith said the joint venture will be a ''completely new company'' and that its management will set the hiring policies for the plant. But the two top executives also noted that workers with many years' experience at the Fremont plant would certainly be highly qualified applicants.

Under the pact, 200,000 subcompact cars a year would be produced for up to 12 years. Each firm will invest $150 million in the venture, with the Fremont plant accounting for $130 million of GM's contribution. Besides the existing plant, which will be retooled and ''roboticized,'' a new parts-stamping plant will be built, probably in Fremont. And several other plants in the US will supply components for the cars. All this, it is said, could produce up to 9,000 additional jobs.

Toyota will provide an executive to run the operation, and a board of directors with equal membership from each company will be formed. Profits will be equally shared. And - something that makes veteran US auto workers cringe and accounts for Toyota's desire to have freedom to hire new workers - employees must be capable of working in a plant where a third or more of the tasks are performed by robots.

Industry observers say the arrangement provides Toyota a means of ''getting around'' voluntary US import quotas accepted by the Japanese. Of the 2.2 million vehicles Toyota marketed in 1982, 530,246 were sold in the US. GM, which has fallen behind in small-car competition with other US automakers as well as Japanese firms, will be given an opportunity for a new bid in that market without having to make the huge investment required to design and produce a totally new vehicle.

The US auto industry already has many ties to foreign firms. But Jouppi sees the GM-Toyota pact as a trend-setter for joint ventures and a strong bid in what he calls the ''world car sweepstakes.''

He says, ''You're not going to hold back the world car (that is, a car that is manufactured and sold in more than one country without having to go through the expensive federalization process). That wave has been coming for 25 years and it's here. Honda, Nissan, and VW essentially are building world cars, and Nissan has chance to win the sweepstakes'' - that is, produce the first widely successful car of this type.

Some observers have said the GM-Toyota agreement is an acknowledgment by the onetime giant of the US industry that the Japanese company is superior. But Jouppi says: ''There is not a company anywhere in the world that can afford to deliver a car for every purse and purpose'' - the idea originated by Alfred P. Sloan Jr., president of General Motors from 1923 to 1937. ''Now GM has given up on that and admitted, 'We can't produce such a car, so now we are allied with Toyota and we're gonna share a plant and not have to develop this auto with our own money. We'll have our money free to go some other place and do the things that we do better.''